The question of whether the action of playing fantasy sports is gambling still doesn’t have a clear answer and is a debatable subject.
Fantasy sports sites are running a business, and apart from getting the licenses that a regular business requires, they are not required to get any specific gambling license.
Varies from State to State
Most of the United States considers fantasy sports, with the inclusion of daily fantasy sports, as a skill-based game and therefore not gambling. But US states such as Iowa, Arizona, Montana, Washington, and Louisiana are stricter about what they consider to be skill-based games and place fantasy sports is their lists of gambling games. Reputed fantasy sports websites want to comply with state laws and do not offer paid fantasy sports services in these states.
Although fantasy sports are held to be skill-based games in most of the US, the NCAA prevented its student athletes from taking part in a daily fantasy sports event in 2015. The National Football League (NFL) even imposed a cap of the amount of money NFL players can legally win from playing fantasy sports.
UIGEA 2006 Exempts Fantasy Sports
The Internet Gambling Enforcement Act (UIGEA), which was passed in 2006, prohibits all forms of online gambling, but exempts educational games, fantasy sports, and all online contests that have “an outcome that reflects the relative knowledge of the participants, or their skill at physical reaction or physical manipulation (but not chance), and, in the case of a fantasy or simulation sports game, has an outcome that is determined predominantly by accumulated statistical results of sporting events, including any non-participant’s individual performances in such sporting events.”
The UIGEA specifically exempts
participation in any fantasy or simulation sports game or educational game or contest in which (if the game or contest involves a team or teams) no fantasy or simulation team is based on the current membership of an actual team that is a member of an amateur or professional sports organization and meets the following conditions.
All awards and prizes for the winners should be made known to all the participants of the games well in advance of it and the value of the prize should have nothing to do with the fees paid by each participant and the total number of participants.
The winning outcome should display the skill and knowledge of the winner and should be determined chiefly by the “accumulated statistical results of the performance of individuals in multiple real-world sporting or other events.”
The winning outcome should definitely not be based on point spread, score, or any performance of any real team or teams or on the way an individual player performs in any real sports or other event.
Popularity of Fantasy Sports
Millions of people in the US and Canada play fantasy sports, having an economic impact worth up to $4 billion on the sports industry, every year. Since as many as 73% of fantasy sports players actually spend real money on the fantasy sports, major sports TV networks such as NBC, CBS, and Fox offer paid fantasy sports services.
Fantasy Sports Websites Serious about Legality
All the fantasy sports websites that FantasySports.net recommends take the issues of legality and compliance very seriously. They go out of their way to ensure that they are complying with federal as well as state laws. If players are concerned about legality issues, we urge them to talk to a gambling advocate before signing up at a fantasy sports website.
Most of the top fantasy sports websites in the industry have joined The Fantasy Sports Trade Association (FSTA), an association that represents the fantasy sports industry and has its headquarters at Illinois in Chicago.
Are Fantasy Sports Winnings Taxed?
Players are required to pay taxes on their net fantasy sports winnings. In compliance with the laws, fantasy sports websites issue tax forms to players who have made a net profit of over $600 per calendar year. Fantasy sports websites also request players to part with their personal information so that they can issue the tax forms in time.
